IBM Study Shows Telco CEOs Struggling to Adapt

[qi:086] The people running the world’s telecommunications carriers are facing a threat to their core businesses due to convergence and a perception of their networks as dumb pipes, according to a report from IBM. As a result, 70 percent of telecom CEOs are concentrating on defending their core business, compared with just 25 percent of the total survey population, which comprises executives from a variety of industries.

IBM’s Global CEO Study, published last week, is based on interviews with 1,130 executives, and includes a report devoted to 47 CEOs of telecommunications providers. Eric Riddleberger, IBM’s global business strategy leader, who heads up the company’s corporate social responsibility consulting efforts, said rather than competition or regulatory changes, the biggest issue haunting the executives at major carriers is how to keep their businesses from becoming a dumb pipe.

“That’s the thing that keeps them up at night on the innovation front,” Riddleberger said. “They aren’t worrying about competing with the cable guys. They worry about someone like a Google or Apple coming in and totally disintermediating them from the consumer.”

Seventy-seven percent of telecom executives plan to change their business models extensively over the next three years, while the remaining 23 percent plan to make more modest alterations. However, instead of tackling the issue of being a dumb pipe through wholesale innovation, 40 percent of the survey respondents are looking to alter their revenue model through changes in pricing plans, such as metering, or new services such as figuring out an acceptable way to leverage their customer knowledge for advertisers.

Another 30 percent are looking at ways to change their operational model such as by outsourcing their network, as Sprint ( s) may do with Ericsson or MVNOs have done. Fifteen percent are looking to change their industry model by thinking of ways to enter new industries or change the current one drastically. Riddleberger said that the closest thing telcos have seen to an industry change so far has been Apple’s success with the iPhone and how the device maker has positioned itself in the middle of the relationship a customer has with a carrier. The remaining 15 percent are looking to try multiple options in changing their operational model.